The U.S. Small Business Administration has released a single-page form designed to make it easier for applicants to complete the application process to forgive Paycheck Protection Program loans, along with newly updated and revised forms to comply with the most recent stimulus legislation.
Congress approved the COVID-19 relief package in the month of March and included $284 billion of financing for small-scale businesses who needed loans. The funds were used to mitigate the economic effects of the coronavirus pandemic. The legislation required that the SBA release simplified forms within 24 hours of the signing into law. This was done to make it easier to apply for forgiveness. Additionally, it included conditions that would encourage community banks to make more loans particularly to minority-owned businesses that had difficulty getting loans in the past.
“The Small Business Administration met the requirement of releasing the single-page form for loan forgiveness under the PPP by 24 days after the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms that were updated.”
First Draw PPP Loan forgiveness terms
Teach For America Loan Forgiveness – First Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24-week period after the disbursement of loan:
- It’s the same for employee compensation and the.
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of the profits go towards payroll costs
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans to qualified customers are eligible for loan forgiveness if the loan is paid within an 8to 24-week period.
- Pay and worker levels are maintained in the same manner as is required for the First Draw PPP loan
- The loan proceeds are used on payroll as well as other eligible expenses and
- At least 60% of profits go towards payroll costs
- How to apply for loan forgiveness , and when
The borrower is eligible for forgiveness only after all loan proceeds for which the borrower has applied for forgiveness have been utilized. Borrowers may apply for forgiveness at any point up to the loan’s maturity date. If they do not file for forgiveness within 10 months of the last day of the period covered, then PPP loan payments can not deferred any longer, and borrowers must make monthly payments to their PPP lender.